June 19 (Bloomberg) -- The Standard & Poor’s 500 Index
retreated the most in two weeks as Federal Reserve Chairman Ben
S. Bernanke said the central bank may reduce bond purchases
later this year as the economy strengthens.

All 10 groups in the S&P 500 fell, with telephone and
utility shares leading losses. Verizon Communications Inc. and
Travelers Cos. tumbled at least 2.2 percent, pacing declines
among the largest companies. Sprint Nextel Corp. declined 4.4
percent after Dish Network Corp. said it won’t make a new offer
for the mobile-phone carrier by a deadline. Adobe Systems Inc.
rose 5.6 percent after reporting second-quarter profit that
topped forecasts.

The S&P 500 lost 1.4 percent to 1,628.93 at 4 p.m. in New
York, for the largest decline since May 31. The index rallied
1.5 percent in the previous two sessions. The Dow Jones
Industrial Average dropped 206.04 points, or 1.4 percent, to
15,112.19 today. About 6.7 billion shares traded hands on U.S.
exchanges today, or 6.8 percent above the three-month average.

“The Fed’s walking a tightrope here,” George Rusnak,
national managing director of fixed-income strategies for Wells
Fargo Private Bank in Philadelphia, which has $107 billion in
assets, said by phone. “They’re balancing preparing the markets
that tapering is going to begin, but at the same time,
comforting them that it’s not going to be too dramatic and too
quick to be disruptive. It’s a fine line.”

The Fed may “moderate” its pace of bond purchases later
this year and may end them around mid-2014, Bernanke said. The
Federal Open Market Committee said at the conclusion of a two-day meeting in Washington that risks to the outlook for the
economy and the labor market have “diminished since the fall.”

Unemployment Rate

The central bank said it will keep buying bonds at a pace
of $85 billion a month, and repeated that it’s prepared to
increase or reduce the pace of purchases depending on the
outlook for the job market and inflation.

Fed officials forecast the U.S. unemployment rate will fall
to 6.5 percent to 6.8 percent by the end of 2014, possibly
reaching its stated threshold to raise the benchmark lending
rate. The FOMC also anticipates that inflation over the medium
term likely will run at or below its 2 percent objective.

U.S. central bankers in December linked changes in the
benchmark borrowing cost to the outlook for employment and
prices. The FOMC said the rate will remain in a range of zero to
0.25 percent so long as unemployment remains above 6.5 percent
and the outlook for inflation is no higher than 2.5 percent. The
nation’s jobless rate in May was 7.6 percent.

‘Frustrated’ Markets

“What markets are maybe frustrated about is 1). some
people were hoping for even more clarity as to what tapering is
going to look like and when it’s going to happen, and 2). people
hoping that the Fed was going to say the pace of economic growth
doesn’t warrant tapering asset purchases,” Joseph Tanious, a
New York-based global market strategist at JPMorgan Funds, which
oversees $400 billion, said by phone. “Both of those parties
are disappointed.”

The Fed’s record low interest rates and bond purchases have
helped fuel a rally in stocks that lifted the S&P 500 as much as
147 percent from its bear-market low in 2009.

The S&P 500 last set a record of 1,669.16 on May 21, the
day before Bernanke told Congress the central bank could begin
to reduce the pace of asset purchases if the job market shows
signs of sustainable improvement. Ten-year Treasury yields
topped 2 percent that day for the first time since March. The
yield on the 10-year note climbed to 2.33 percent today, the
highest level in 15 months.

Dividend Yields

Concern that slower Fed bond-buying will push Treasury
yields higher prompted investors to sell shares of companies
that have the highest dividend yields. Phone stocks fell 2.7
percent as a group, while utility companies erased 2.3 percent.
The two industries yield the most in the S&P 500. Verizon, which
has a payout rate of 4.1 percent, slumped 2.9 percent to $50.05
for the biggest drop in the Dow.

The Bloomberg REIT Index, which yields 3.6 percent in
dividends, posted its biggest one-day drop since November 2011.
Homebuilders also fell as the S&P Supercomposite Homebuilding
Index ended four straight days of gains. D.R. Horton Inc.
dropped 3.9 percent to $23.44, while Lennar Corp. slid 3.7
percent to $37.85.

Sprint slipped 4.4 percent to $7. Dish Network won’t make a
new offer by Sprint’s deadline, leaving SoftBank Corp. as the
main contender to acquire the wireless company. Dish rose 0.5
percent to $39.27. Sprint’s actions “have made it impracticable
for Dish to submit a revised offer by the June 18th deadline,”
Englewood, Colorado-based Dish said. “We will consider our
options with respect to Sprint” while focusing on Clearwire
Corp.

Financials Slump

Travelers lost 2.2 percent to $82.28 as financial companies
erased 1.4 percent as a group. The KBW Bank Index declined 0.9
percent as all 24 of its members decreased.

Adobe Systems rose 5.6 percent to $45.78 for the biggest
advance in the S&P 500. Profit excluding some items for the
fiscal second quarter through May was 36 cents a share, the
company said. That beat the average estimate for 34 cents,
according to analysts’ projections compiled by Bloomberg.

Nvidia Corp. rallied 3.1 percent to $14.84. The largest
maker of chips used in computer graphics cards said it plans to
license technology to other chipmakers seeking to broaden
sources of revenue.

FedEx Corp. gained 1.1 percent to $100.54. The world’s
largest cargo airline forecast earnings per share for fiscal
2014 will rise as much as 13 percent to $7.04.